The Evil Diaries: “surely an expression of a death wish”

Last week, Jim Slater compared an investment in Telford Homes (TEF) with one in ASOS (ASC). He is very keen on Telford and he may be right so to enthuse – I myself am cautious about housebuilders since they have always seemed cyclical to me. However, he slates (well, he would wouldn’t he) ASOS arguing that a PE for 2016 of 70 is quite ridiculous. I am sure he is right given the declining profit margins and the emergence of competition such as BooHoo (BOO) whose results appeared today.

I add that an investment in ASOS is surely an expression of a death wish since not only is a PE of 70 perfectly potty it is held up by sales of ASOS shares being deferred until the owner, seeking that his estate benefits from IHT relief, has done his necessary two years of holding: thereafter the beneficiaries of the will can get out, clear of CGT and IHT. This is an entirely artificial levitation trick. Further I can’t think of any good reason to allow IHT relief on an AIM listed stock. That prop could therefore easily evaporate.

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Poundland (PLND) has decided to plough on with the Competition and Markets Authority’s enquiry into the propriety of its takeover of 99p Stores Limited. This insistence on wasting money must enrage them them. But it seems certain to me that they will get clearance and, that being the case, Poundland remains a buy at 316p.

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When Michael Lewis’s Flashboys came out a couple of years ago I thought it would be an interesting skim through. However, I only started reading it a fortnight ago. For those of you who have not taken this step yet, I warn you that you are likely to be disappointed – and I so declare even though I am only three eighths of the way through the book. I short-circuited to a conclusion by asking a pal who told me that the book is like a grossly extended newspaper article which never comes to an important conclusion.

Basically, some bright fellows realised perhaps seven or eight years ago that they could improve their chances when trading by using fibre optic cables which were straighter and faster than those used by the competition.

Laying down such a cable from NYC to Chicago is not cheap and securities businesses had to pay big money to reserve a cut of their use. However its use enabled specially programmed computers to know a tiny fraction of a fraction of a fraction of second ahead of the competition that there was an order on its way which could be front-run. This is known as HFT or High Frequency Trading. Its proponents argued that it provided liquidity. But since they never took any principal risk and in practice merely read a trading decision faster than anybody else, they could, so to speak, jump the queue. They did. This is nothing to do with liquidity. It’s all to do with being a bit, well, flash.

No estimates are offered as to how much the public has been ripped off. But it could easily run to many billions of US dollars.

I don’t know what the state of play is now as regards HFT but the book itself does not merit the gushing endorsements printed on the book’s covers.

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I suppose we’re heading for a Miliband grouping proposing that its authority to govern can arise although entirely based on SNP support. I reckon the country will riot at this point.